Banks Can't Price Their Way Out of Bad Customer Experience

A report from Forrester claims that for banks, customer experience is a more powerful loyalty driver than price- value perception.

For banks, customer experience is a more powerful customer loyalty driver than price- value perception, according to a new report from Forrester Research.

The report, authored by Forrester analyst Maxie Schmidt-Subramanian, said that customer experience accounts for the majority of loyalty among bank consumers. Price-value perception plays just a small additional part in driving loyalty, she wrote.

"Years of Forrester data across multiple industries confirms the strong relationship between the quality of a firm’s customer experience and the loyalty of its customers," reads a portion of the report. "But even we were surprised to see how much more important customer experience is than price-value perceptions when it comes to driving loyalty."

Schmidt-Subranian said banks need to take several factors into consideration in this regard. Firstly, she wrote that price becomes irrelevant if a product or service doesn't meet a customer's needs.

Also, Schmidt-Subramian notes that creating enjoyable interactions for customers also often outweighs pricing considerations. For example, she writes, one reason customers chose credit unions over banks is because of their helpfulness and trustworthiness. "For example, a small business owner who needs to deposit cash or checks at odd hours might first identify the subset of banks that offers ATMs close to work," she writes. "In that case, a bank without nearby ATMs won’t be considered, even if the bank offers free checking."

However, she acknowledged, pricing does impact customer experience, and banks that pursue overly aggressive pricing or those that nickel-and-dime customers can create a lasting negative impact on customer experience. Schmidt-Subramian advises banks that to win over customers, they need to build trust in the transparency and fairness of their rates and fees.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

Banks are going to have to be more mindful of how transparent their fee structure is going forward with products like Bluebird that use fee transparency as one of their main selling points vs. traditional bank accounts.

For quite some time now evidence supports the common sense (though not common practice) notion that customers are willing to pay more (i.e. are less price sensitive) for great service. Makes me wonder if we are finally at a point where the C-suite realizes that exceptional customer service can create a sustainable competitive advantage? http://bit.ly/cgIDeD